Hampered by scandals, Wells Fargo’s profits stagnate
NEW YORK (AP) — Wells Fargo, the consumer banking giant, said its fourth-quarter profits fell slightly on Tuesday as the bank remains restrained by federal regulators, who put a tight leash on it after years of scandals and missteps.
The San Francisco-based bank said it earned a profit of $6.06 billion in the last three months of a year, or $1.21 per share. That is down from $6.15 billion, or $1.16 per share, in the same period a year earlier. The results did beat analysts’ expectations, who were looking for Wells to earn $1.19 a share.
Wells Fargo has been in a multi-year attempt to turn itself around after years of scandals in nearly every part of its business. Federal regulators have fined the bank billions of dollars for violating consumer protection laws, and the Federal Reserve a year ago restrained Wells Fargo from growing any larger than its current size until the bank can prove it’s a better-run company.
The restraints have put a hamper on the ability of Wells Fargo to increase its profits in the past year. The bank saw its total loans fall slightly from a year ago, and deposits were also down slightly.
That’s notable because, in a growing economy, a bank the size of Wells Fargo should be growing both deposits and loans. JPMorgan Chase & Co, which also reported its fourth-quarter results on Tuesday, reported an 8 percent increase in loans and 2 percent growth in deposits. Citigroup, which reported on Monday, also reported higher loans and deposits.
“This is a troubling erosion of Wells Fargo’s market share,” said Octavio Marenzi, chief executive of the management consulting firm Opimas.
It doesn’t appear the restraints on the bank will be coming off any time soon. In a conference call with investors, Wells Fargo Chief Executive Tim Sloan said he now expects Wells Fargo will operate under the Federal Reserve’s restraints through the end of 2019. The bank recently had been expecting those restraints to come off the middle of this year.
Wells Fargo, which is the biggest U.S. mortgage lender, posted revenue of $25.26 billion in the period. Its revenue net of interest expense was $20.98 billion, which also missed forecasts. Analysts were looking for Wells to earn $21.74 billion in revenue.
Wells Fargo’s stock fell 2.1 percent to $47.31.